Companies that transport dangerous goods should be aware of the
implications and potential risks involved when dangerous goods are
consigned for transportation, the scope of potential liability, and
the steps that may be taken to mitigate potential liability.
On July 29, in the wake of the Lac-Mégantic
disaster, the government of Quebec issued a broad order under Section 114.1 of the Environment Quality Act. That order
requires the companies named to recover the oil and all other
contaminants in water and soil, to prevent oil and contaminants
from spreading into the environment, to conduct an assessment of
the effect of the contamination, and to submit an action plan to
If the work is not completed, the government has stated that it
will complete the work at the companies' expense.
Such orders are commonly made under environmental legislation
across Canada, and while the order is onerous, it is not unusual.
What makes this order noteworthy is, first, that the order
was made against not only the railroad but against the
railroad's parent company, and second, that the order was made
against both the company that owned the material spilled and its
The making of an order against the two parent companies is
interesting. Section 114.1 provides as follows:
114.1. Where he considers that there is urgency, the
Minister may order any person or municipality being the owner of
certain contaminants or having had the custody or control thereof,
to collect or to remove any contaminant dumped, emitted, issued or
discharged into the water or onto the soil, accidentally or
contrary to the provisions of this Act or the regulations of the
Government, and to take the measures required to clean the water
and the soil so that these contaminants cease to be spread or to
propagate in the environment.
The authority to issue orders against shareholders is
questionable. It is not known whether the authority claimed
by the Minister in this case is based on an allegation that those
shareholders were the owners or in custody or control of the
materials, or whether the intent of the Minister is to pierce the
corporate veils of the two companies directly involved.
The shareholder of the owner of the oil has stated that it has
objections to the legality of the order and will be discussing
those objections with the Minister.
The authority of the Minister to make an order against the owner
of the spilled oil is more clear, and should serve as a
reminder to owners of hazardous materials who ship such materials
on third party carriers in Canada that liability does not stop when
materials are consigned for transport. The authority of
regulatory authorities across Canada to make these types of orders
is varied across Canada, but it is generally very broad and
includes both persons who have custody of hazardous materials
(transporters) as well as the owners or previous owners of such
Owners of hazardous materials should be aware of their potential
liability for cleanup orders arising out of accidents that occur in
transit. In addition to the due diligence that such owners
should take with respect to the quality of third party
transporters, such owners should also ensure that appropriate
contracts and indemnities (backstopped by insurance) are in place
to appropriately allocate the risk of an accident taking place
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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